Starting a dealership business can be profitable if aspects like planning, strategy, execution, demand, and capital are done right.
Dealerships make money arranging loans, selling add-ons and from trade-ins bought low and sold at a nice profit. In addition to sales, they generate profit from financing, leasing, insurance packages or warranties.
Average Earnings:
- On average, a car dealership owner can expect to make around $90,593 per year.
- The salaries range from $18,902 to $495,413.
Profit Margins:
- New cars tend to have a profit margin for dealerships between 8-13% over invoice price.
- Used cars can have 10-25% markup over dealer cost allowing negotiation room.
Steps to Start a Used Car Dealership
- Finding a commercially viable location
- Choosing a business structure
- Learning your target market and inventory they want
- Having enough capital for inventory
Salespeople and Negotiation Tactics
Do car salesmen make a lot of money?
- Dealership salespeople average about 10 car sales per month, and earn an average of about $40k per year.
- New vehicle sales rarely pay $300+ commissions, while used cars can sometimes pay $1,000 commissions.
How do you talk down a car price?
- Negotiation by email or phone keeps you in control.
Car Dealership Market Trends and Future
What is the growth potential of a car dealership?
The growth potential of a car dealership is really unlimited. You can expand to multiple locations in your area, or even across the country.
What is the future for car dealerships?
While dealerships have been adjusting to their “new normal” since 2020, ongoing inventory shortages, rapid digitalization and changing consumer preferences are still creating new opportunities for dealers in 2022.
What is the most profitable part of car dealership?
The most profitable parts tend to be selling add-ons such as financing and insurance packages, and the trade-ins.